Monetary Policy in India: Objectives, Reaction Function and Policy Effectiveness

In the first part of this paper, the policy reaction functions of the Reserve Bank of India (RBI) have been modeled to see how policy stance decisions respond to the changes in the goal variables. In the second part, the transmission effects of RBI’s policy stances on the goal variables have been analyzed using the Granger causality test, and analysis of simple estimated models of relevant variables. It may be suggested from the results that the RBI should not be working simultaneously with instruments of quantity and price control and should shelve the cash reserve ratio (CRR) and concentrate more on price variables for conducting monetary policy.

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Journal Article
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Review of Applied Economics, 02, 2
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JEL Codes:
C2; E4; E5

 Record created 2017-04-01, last modified 2019-08-26

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